Fannie and Freddie not at fault

[kcshocker11]

http://www.kansascity.com/news/politics/story/838366.html

Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers in the housing boom from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

•More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

8)

[WstateU]

Re: Fannie and Freddie not at fault

http://www.kansascity.com/news/polit...ry/838366.html

Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers in the housing boom from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

•More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

8)

How the Democrats Created the Financial Crisis: Kevin Hassett

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0

:good: :good:

[ABC]

Private lenders issued the mortgages b/c they were guaranteed by Freddie and Fannie.

[shocrates]

I will give you an A for persistence, KC11.

[kcshocker11]

Private lenders issued the mortgages b/c they were guaranteed by Freddie and Fannie.

Thanks Shocrates!
ABC- please read again!

Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

On Kevin Hassett -

http://en.wikipedia.org/wiki/American_Enterprise_Institute

The American Enterprise Institute for Public Policy Research (AEI) is a conservative think tank, founded in 1943.

Kevin Hassett is senior fellow at the think tank American Enterprise Institute where he directs economic policy studies. He regularly appears on Bloomberg Television. He advised President Bush in his campaign, and he currently serves as a senior economic adviser to the John McCain 2008 presidential campaign.

I give you studies using Fed Data and you give me an article from a partisan? Wow



:whistle: 8)

[ABC]

kcshocker,

Did you not even read the article you linked?

"However, Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corp., don’t lend money. They purchase loans from the private lenders that underwrite the loans
private lenders that underwrite the loans."

http://www.nypost.com/seven/09092008/postopinion/opedcolumnists/fannie_freddie_bailout_baloney_128135.htm

Gerald P. O'Driscoll Jr. is a senior fellow at the Cato Institute and is a former vice president and economic adviser at the Federal Reserve Bank of Dallas says:

"Homeowners became hostage to a system that depended on securitizing mortgages with guarantees from Fannie and Freddie. That made them part of the constituency opposed to reform.

The essential problem: Fannie and Freddie were private firms, with stockholders who garnered billions in profits over the years. Yet the government was understood to guarantee their debt. That is, it bore the risk if they failed, as they now have."

Surely you aren't saying they are not part of the problem.

[kcshocker11]

kcshocker,

Did you not even read the article you linked?

"However, Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corp., don’t lend money. They purchase loans from the private lenders that underwrite the loans
private lenders that underwrite the loans."

http://www.nypost.com/seven/09092008/postopinion/opedcolumnists/fannie_freddie_bailout_baloney_128135.htm

Gerald P. O'Driscoll Jr. is a senior fellow at the Cato Institute and is a former vice president and economic adviser at the Federal Reserve Bank of Dallas says:

"Homeowners became hostage to a system that depended on securitizing mortgages with guarantees from Fannie and Freddie. That made them part of the constituency opposed to reform.

The essential problem: Fannie and Freddie were private firms, with stockholders who garnered billions in profits over the years. Yet the government was understood to guarantee their debt. That is, it bore the risk if they failed, as they now have."



Surely you aren't saying they are not part of the problem.

No , just not a major cause and it is dishonest to say it was! Yes they underwrite loans but not majority of the all loans, this data show the mortgages that they underwrote were not significant and only a small portion8)

[DUShock]

Due diligence

[ABC]

A study using Fed Housing data analyzed by who?

From that well-known conservative rag, the Village Voice (sarcasm):

http://www.villagevoice.com/content/printVersion/541234

"In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy. The GSEs don't actually sell mortgages to borrowers. They buy them from banks and mortgage companies, allowing lenders to replenish their capital and make more loans. They also purchase mortgage-backed securities, which are pools of mortgages regularly acquired by the GSEs from investment firms. The government chartered these banks to pump money into the mortgage market and, while they did it, to make a strong enough profit to attract shareholders. That created a tug-of-war between their efforts to maximize shareholder value, which drove them toward high-end mortgages, and their congressionally mandated obligation to finance loans for those who needed help. The 1992 law required HUD's secretary to make sure housing goals were being met and, every four years, set new goals for Fannie and Freddie."

"When HUD released the next set of goals in 2004, it reported that after Cuomo's previous edict, there had been a sudden spurt of GSE subprime investment, "partly in response to higher affordable-housing goals set by HUD in 2000." Fannie had gone from $1.2 billion in subprime-mortgage and securities purchases in 2000 to $9.2 billion in 2001 and $15 billion in 2002. Freddie's numbers were murkier, but clearly also on the rise. In 2003 alone, the two bought $81 billion in subprime securities"

Right, they were just a minor player.

[kcshocker11]

A study using Fed Housing data analyzed by who?

From that well-known conservative rag, the Village Voice (sarcasm):

http://www.villagevoice.com/content/printVersion/541234

"In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy. The GSEs don't actually sell mortgages to borrowers. They buy them from banks and mortgage companies, allowing lenders to replenish their capital and make more loans. They also purchase mortgage-backed securities, which are pools of mortgages regularly acquired by the GSEs from investment firms. The government chartered these banks to pump money into the mortgage market and, while they did it, to make a strong enough profit to attract shareholders. That created a tug-of-war between their efforts to maximize shareholder value, which drove them toward high-end mortgages, and their congressionally mandated obligation to finance loans for those who needed help. The 1992 law required HUD's secretary to make sure housing goals were being met and, every four years, set new goals for Fannie and Freddie."

"When HUD released the next set of goals in 2004, it reported that after Cuomo's previous edict, there had been a sudden spurt of GSE subprime investment, "partly in response to higher affordable-housing goals set by HUD in 2000." Fannie had gone from $1.2 billion in subprime-mortgage and securities purchases in 2000 to $9.2 billion in 2001 and $15 billion in 2002. Freddie's numbers were murkier, but clearly also on the rise. In 2003 alone, the two bought $81 billion in subprime securities"



Right, they were just a minor player.

Still only 17% :whistle: 8)

[rrshock]

Let me ask a question to everyone here.

How many on here got a loan to buy a house, only to have it bought by some other company? I did and was only told that they might sell it to another company.

If a private lending institution such as the local bank makes a loan, then decides to sell it to the Fannies or Freddies or Countrywides of the world, how did the big companies influence that? Or did they have to make it meet certain criteria before making the loan to the individual?

[RoyalShock]

If the primary lenders know that no one will buy their bad loans, they wouldn't make those loans in the first place. As it was, the private banks basically had a key to the dump.

It's another example of the principle that you can't just open the door a little.

But yes, my current and past mortgages has been transferred more than once. One thing I've noticed, however, is that SunTrust seems to not sell theirs, which makes me think they were one of the more responsible ones.

We were one of those homeowners that refinanced into two loans (we cashed in some equity). But we also bought less home than what we could reasonbly afford. At the time we refinanced our loan was with WaMu.

[Maggie]

Royal is a basically correct – the primary lenders want to be able to shift of the risk of the “bad loans” by selling them to those that package them together and convert them to securities. This allows the local banks to extend even more credit.

When the pressure originally mounted on these private banks to lower their lending standards – initially entities like Fannie and Freddie refused to purchase them. It was Congress, under pressure from certain interest groups, that forced Fannie and Freddie to change their policy – and when everyone discovered they could make a little money off these suspect loans the greed kicked in.

[rrshock]

If the primary lenders know that no one will buy their bad loans, they wouldn't make those loans in the first place. As it was, the private banks basically had a key to the dump.

It's another example of the principle that you can't just open the door a little.

But yes, my current and past mortgages has been transferred more than once. One thing I've noticed, however, is that SunTrust seems to not sell theirs, which makes me think they were one of the more responsible ones.

We were one of those homeowners that refinanced into two loans (we cashed in some equity). But we also bought less home than what we could reasonbly afford. At the time we refinanced our loan was with WaMu.

I think all the mortgage selling and buying has lead to some of this problem too. There is no stability. If banks just kept their own loans that they made, maybe none of this would have happened in the first place.

[RoyalShock]

rr, I completely agree.

The problem, though, is that our monetary system (you know, that boring ol' thing no one wants to talk about), is based entirely on the issuance of credit - which increases the money supply - to fuel growth. When you have banks/investors essentially betting on whether a loan will default (credit default swaps), there is something inherently wrong with the system.